Bellway Homes Ltd v Beazer Homes Ltd (2011)
Where the two members of a joint venture residential development company had agreed upon a final allocation of a parcel of land in the belief that a planning application for development of the land would be granted, there was no scope for re-opening the agreed allocation when planning permission was partly refused, thereby causing an imbalance in the respective values of the land. There was no contractual mechanism for any future readjustment and the parties had intended their agreement to be final.
The appellant (X) appealed against a decision ((2010) EWHC 423 (Ch)) allocating the respondent (B) part of development land owned by a joint venture company (L). B and X owned L in equal shares and used it to develop and sell land for residential use. Areas of land on one site were sold to B or X, not necessarily in equal amounts, but often in agreed proportions to reflect the capacity of each to undertake developments at different stages. Under the terms of their shareholders' agreement that approach was permitted with X and B's consent. They developed sites in that manner on the basis that any imbalance in allocation of land would be made up in subsequent sales to them by L. Clause 3.1(d) of the agreement required L to dispose of the land whether by sale exchange or lease exchange to B and X in parcels of equal value as near as might be unless X and B agreed otherwise, and for X and B to deal with the land as they saw fit. When only two areas of the first site were remaining, X had received more land than B. They exchanged letters about a final allocation of the site and agreed that, to address the imbalance, B would take a greater portion of one of the remaining two areas. However, planning permission for that portion was subsequently refused, which neither party had anticipated. L had, by then, acquired a second site which B and X had started developing. B's case was that L should dispose of the land on the second site in a way that rectified the imbalance in the values of the land disposed of to B and X in the first site and the court below had granted a declaration to that effect. X submitted on appeal that the agreed allocation at the first site had been final, that the shareholders agreement did not provide for any subsequent re-allocation, that the declaration was contrary to the shareholders agreement, and that the requirement of equality only arose upon each disposal under clause 3.1(d).
When the parties had agreed on the final allocation of land at the first site, the result of their planning application was unknown and they had mistakenly believed the land to be capable of development. They could have waited to see whether full planning permission would be granted, or reserved their position in the event that it was not, but they had instead relied upon their own beliefs. Absent a contractual mechanism for re-adjusting the final allocation as agreed, the loss had to lie where it fell, and B had therefore assumed the risk of a refusal of full planning permission. The fact that the agreement extended to the second site as well as the first was irrelevant. Although the outcome was harsh for B, it gave effect to the parties' intentions, which was to bring finality and restore equality to the allocation of land on the first site. To suppose that the parties intended to reopen the agreed allocation years after the event was improbable and would involve imposing on X a subsequent unequal disposal in respect of the second site, without agreement.
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